Vintage Speedsters v. Vintage Motorcar

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.
IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
VINTAGE SPEEDSTERS OF CALIFORNIA, Plaintiff/Appellee,
v.
VINTAGE MOTORCAR LTD, Defendant/Appellant.
No. 1 CA-CV 21-0501
FILED 6-14-2022
Appeal from the Superior Court in Maricopa County
No. CV2019-051077
The Honorable Theodore Campagnolo, Judge
AFFIRMED
COUNSEL
Sherrets Bruno & Vogt LLC, Scottsdale
By Jason M. Bruno, Robert S. Sherrets
Counsel for Plaintiff/Appellee
Perry-Meier & Associates PLLC, Phoenix
By Janae Perry-Meier
Counsel for Defendant/Appellant
VINTAGE SPEEDSTERS v. VINTAGE MOTORCAR
Decision of the Court
MEMORANDUM DECISION
Judge Randall M. Howe delivered the decision of the court, in which
Presiding Judge Jennifer B. Campbell and Judge James B. Morse Jr. joined.
H O W E, Judge:
¶1 Appellant Vintage Motorcar Ltd. (“Motorcar”) challenges the
trial court’s granting summary judgment to Appellee Vintage Speedsters of
California (“Speedsters”) on its claim that Motorcar breached the parties’
asset purchase agreement by failing to make royalty payments. We affirm.
FACTUAL AND PROCEDURAL HISTORY
¶2 Speedsters and Motorcar entered an agreement in 2017 that
Motorcar would purchase most of Speedster’s assets (“Asset Purchase
Agreement” or “APA”). The assets included two molds used to build
bodies for certain Porsche Speedster models and Speedster’s rights under a
“Body Contract” with Peregrine Industries (“Peregrine”), which
manufactured the Speedster bodies. The Body Contract memorialized a
“standing agreement . . . that Peregrine . . . will not produce a ‘speedster’ or
anything that resembles a speedster” for anyone other than Speedsters,
with those exclusivity rights “transferable only by . . . Speedsters.” The
Body Contract also memorialized the “transfer [of] production rights as
well as the ownership of the molds” to Motorcar and stated that “[p]ricing,
service and delivery [would] remain the same.”
¶3 In the APA, Motorcar agreed to pay an initial $200,000
followed by royalty payments of $3,000 for each of the first fifty vehicles it
sold and $2,000 for each vehicle sold thereafter not to exceed a total
payment of $300,000. About a year later, the parties entered an Amended
APA that changed the royalty terms as follows:
Buyer shall pay Seller four (4) Royalty Payments of $6,000.00
per month from September 2018 through December 2018.
Buyer shall pay Seller fourteen (14) Royalty Payments of
$8,000.00 per month from January 2019 through February
2020.
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VINTAGE SPEEDSTERS v. VINTAGE MOTORCAR
Decision of the Court
Buyer and Seller expressly agree that if any Selling Party
breaches any of its obligations or defaults under the Purchase
Agreement, the Non-Competition Agreement, or any other
Transaction Document, or if the Body Contract does not remain
in full force and effect for a period of at least two (2) years following
Closing in accordance with Paragraph 2.5 of the Purchase
Agreement, then (i) Buyer’s obligation to make any further
Royalty Payments shall immediately cease, (ii) the Royalty
Agreement shall be deemed immediately terminated, and (iii)
Seller and the other Selling Parties shall not be entitled to any
Royalty Payments as set forth herein that have not been paid
(emphasis added).
Soon after, however, Peregrine went out of business. As a result, Motorcar
stopped making royalty payments in October 2018.
¶4 Speedsters sued five months later. The parties cross-moved
for summary judgment. Motorcar contended in its motion that its royalty
payment obligations had terminated because Peregrine had gone out of
business, ending the Body Contract. It also contended that “one of
[Speedster’s] former employees, Greg Leach . . ., began operating a
competing business selling speedster bodies and parts out of [Speedster’s]
former business location, using [its] former employees.” Motorcar’s owner,
Michael Teerink, stated in his deposition that the price per mold has
increased over $1,000 since “the agreement.”
¶5 Speedsters contended, however, that “Motorcar continue[d]
to enjoy the benefits of the Body Contract and will continue to do so in the
future” through Leach’s company. Leach stated in his deposition that he
did not formally assume the Body Contract and had never seen it. He stated
that he managed the day-to-day operations at the Peregrine facility, had
leased Peregrine’s building, and had hired its employees. While Leach’s
business was not Peregrine, it did use Motorcar’s molds to make speedster
bodies only for Motorcar. The bodies that he made for his own business
were not from Motorcar’s molds. Finally, Leach stated that any increase in
the cost of the molds was due only to increased labor, shipping, and
material costs.
¶6 The trial court granted Speedsters summary judgment,
finding that Leach had “assumed the manufacturing and delivery
operations that were previously performed by Peregrine” and that
Motorcar “has never made demand . . . for non-performance under the
Body Contract, nor ha[d it] challenged Greg Leach’s takeover of Peregrine
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Decision of the Court
Industries’ operations.” On that basis, the trial court concluded that “the
terms of the Body Contract are being fully performed, and that the Body
Contract remains in full force and effect.” The court also awarded attorney
fees, costs, and Arizona Rule of Civil Procedure 68 sanctions to Speedsters.
Motorcar timely appealed.
DISCUSSION
¶7 Motorcar appeals the trial court’s summary judgment ruling
arguing that it erred in granting Speedsters summary judgment because
(1) the Body Contract terminated when Peregrine went out of business;
(2) Leach materially violated the Body Contract’s “Pricing, Servicing, and
Delivery” Terms; (3) Leach violated the Body Contract’s exclusivity
provision; and (4) a genuine dispute of fact existed that precluded summary
judgment. In reviewing the trial court’s rulings on cross-motions for
summary judgment, we consider questions of law de novo but review the
facts in a light most favorable to the party against whom summary
judgment was granted. Matter of Estate of Podgorski, 249 Ariz. 482, 484 ¶ 8
(App. 2020). The court should grant summary judgment only if it finds that
no genuine issues of material fact exist, and that one party is entitled to
judgment as a matter of law. Grain Dealers Mut. Ins. Co. v. James, 118 Ariz.
116, 118 (1978).
¶8 We review the trial court’s interpretation of the APA,
Amended APA, and Body Contract de novo. ELM Ret. Ctr., LP v. Callaway,
226 Ariz. 287, 290 ¶ 15 (App. 2010). Our purpose in interpreting contracts is
to determine and enforce the parties’ intent. Terrell v. Torres, 248 Ariz. 47, 49
¶ 14 (2020). To determine the parties’ intent, we look to the plain meaning
of the words as viewed in the context of the contract as a whole. ELM, 226
Ariz. at 290–91 ¶ 15.
I. The Trial Court Did Not Err in Granting Summary Judgment to
Speedsters.
A. The Body Contract Did Not Terminate When Leach’s
Company Took Over Peregrine’s Business.
¶9 Both the APA and Amended APA state that Motorcar’s
royalty obligations “immediately cease” if “the Body Contract does not
remain in full force and effect” for at least two years after closing. Motorcar
contends these provisions create a condition subsequent that was triggered
when Peregrine went out of business. Motorcar bore the burden to show
this condition subsequent occurred and excused its royalty payment
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Decision of the Court
obligations. Clark v. Compania Ganadera de Cananea, S.A., 95 Ariz. 90, 93
(1963).
¶10 The Body Contract did not stop being in full force and effect
merely because Peregrine went out of business. Teerink testified that Leach
was “running [Peregrine’s] business operations.” Leach similarly testified
that while his company did not formally assume the Body Contract, it (1)
leased the building Peregrine had leased, (2) hired Peregrine’s employees
to continue to do the same work, and (3) managed the day-to-day
operations of what used to be the Peregrine plant. Neither the APA nor the
Body Contract required Peregrine to formally assign its Body Contract
rights and obligations, and nothing in the Body Contract suggests that it
would terminate if Peregrine assigned the contract. Cf. Restatement
(Second) of Contracts § 317(2)(c) (1981) (barring assignment of contractual
rights if assignment is “validly precluded by contract”); see also Highland
Village Partners, L.L.C. v. Bradbury & Stamm Const. Co., 219 Ariz. 147, 150 ¶
11 (App. 2008) (relying on Restatement (Second) of Contract § 317(2)).
Motorcar’s argument that the Body Contract terminated upon Peregrine
going out of business is therefore unavailing.
B. The Court Did Not Err in Finding No Material Breach of the
Body Contract’s “Pricing, Service and Delivery” Terms.
¶11 Motorcar contends that “pricing, service and delivery”
changed when Leach’s company took over Peregrine’s operations. The
Body Contract states that pricing, service, and delivery would “remain the
same,” but Motorcar does not establish what those terms were between
Speedsters and Peregrine.
¶12 The only evidence on pricing is Teerink’s testimony that the
price for a body had increased “nearly a thousand dollars since the
inception of this agreement.” What agreement Teerink referenced is
unclear. Moreover, no evidence suggests Speedsters and Peregrine agreed
to keep prices static for any specific period. Nonetheless, Leach testified,
and Motorcar does not dispute, that any price increase would have been
due to increases in labor, shipping, and material costs. And Teerink
conceded that he had not asked Leach to revert to any earlier prices or to
return the molds.
¶13 As for changes to service, Teerink stated only that Motorcar
now communicated with a different person to place orders. And as for
delivery, Teerink testified that “all of our bodies come through” Leach’s
company’s facility in California—a facility previously leased by Speedsters.
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Decision of the Court
Motorcar’s contention that these terms changed in the changeover from
Peregrine to Leach’s company therefore lacks record support.
C. Motorcar Did Not Show That It Lost Any Exclusive
Production Rights.
¶14 Motorcar also argues that the Body Contract granted it “the
exclusive right to anything resembling a speedster manufactured by
Peregrine—regardless of the molds used.” It also contends that the Body
Contract gave it “the right to transfer its rights to exclusive production of
speedster bodies (or anything resembling a speedster) manufactured by
Peregrine” once the APA became effective. The term on which Motorcar
relies provides:
It is understood and agreed upon that all of the molds are the
property of [Speedsters]. Marion Davies and his company
Peregrine Industries only produces bodies on these molds for
[Speedsters]. Furthermore, a standing agreement exists that
Peregrine Industries will not produce a “speedster” or
anything that resembles a speedster for any other person or
company.
¶15 Generally, contractual terms are interpreted in the broader
context of the entire contract. Apollo Educ. Group, Inc. v. Nat’l Union Fire Ins.
Co. of Pittsburgh, PA, 250 Ariz. 408, 411 ¶ 11 (2021). Immediately above the
quoted term is a description of the two molds Motorcar bought under the
APA. Immediately below it is a statement that the “molds and exclusive
productions [sic] rights are transferable only by [Speedsters].” Thus, when
read in context, the quoted term only bars use of the molds owned by
Speedsters/Motorcar to make speedsters, or anything resembling a
speedster, for other customers. See United Cal. Bank v. Prudential Ins. Co. of
Am., 140 Ariz. 238, 259 (App. 1983) (“A clause in a contract, if taken by itself,
often admits of two meanings, when from the whole contract there is no
reasonable doubt as to the sense in which the parties use it.”) (quoting
Climate Control, Inc. v. Hill, 86 Ariz. 180, 188 (1959)).
¶16 While the parties agree that Leach’s company makes bodies
for other customers using other molds, Motorcar presented no evidence
that Leach’s company uses the molds at issue to make bodies for any other
customer. Nor did Motorcar seek to transfer these exclusive rights to
anyone else or show that Leach precluded it from doing so. Motorcar’s
performance under the Amended APA was therefore not excused as a
result of Leach’s producing his own speedster bodies. C.f. Zancanaro v.
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Decision of the Court
Cross, 85 Ariz. 394, 400 (1959) (“Ordinarily the victim of a minor or partial
breach must continue his own performance, while collecting damages for
whatever loss the minor breach has caused him.”).
D. Teerink’s Conclusory Testimony Does Not Create a
Genuine Issue of Material Fact.
¶17 Motorcar also contends Teerink’s testimony that the Body
Contract “is not in effect” establishes genuine issues of material fact. This
testimony is based on Teerink’s contentions that the “service” and
“delivery” terms had been breached and that Leach’s company was “selling
. . . Speedster bodies to anybody who . . . comes with money.” We addressed
and disposed of those contentions more fully set forth above. In any event,
conclusory testimony does not defeat a motion for summary judgment. See
Florez v. Sargeant, 185 Ariz. 521, 526–27 (1996). For these reasons, the trial
court did not err in granting summary judgment to Speedsters.
II. Attorney Fees and Costs on Appeal
¶18 Both parties request their attorney fees incurred in this appeal
under A.R.S. § 12–341.01(A), which authorizes a discretionary award to the
successful party in an action arising out of a contract. Speedsters is the
successful party on appeal and may recover reasonable attorney fees and
taxable costs incurred in this court upon compliance with Arizona Rule of
Civil Appellate Procedure 21.
CONCLUSION
¶19 For the reasons stated, we affirm.
AMY M. WOOD • Clerk of the Court
FILED: AA
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